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Waters Corporation Reports Third Quarter Results

MILFORD, Mass.--(BUSINESS WIRE)--Oct. 25, 2005--Waters Corporation (NYSE:WAT) announced today that its third quarter 2005 sales grew 3% compared to sales in the third quarter of 2004. Foreign currency translation had a negligible effect on this growth rate. Earnings per diluted share (E.P.S.), including a tax provision related to a qualified dividends distribution under the American Jobs Creation Act of 2004, were $0.22. Excluding this tax provision, E.P.S. for the quarter would be $0.43, a 2% increase over the $0.42 E.P.S. reported in the third quarter of 2004.

Through the first nine months of 2005, sales for the Company were $826.0 million, a 6% increase over sales in the first nine months of 2004 of $780.4 million, with foreign currency translation benefiting sales growth by 1%. Through the first nine months of 2005, E.P.S. were $1.07 compared to $1.24 for the comparable period in 2004. On a non-GAAP basis and including the adjustments in the attached reconciliation, E.P.S. grew 7% in the nine months of 2005 to $1.27 from $1.19 in 2004.

Commenting on the quarter, Douglas Berthiaume, Chairman, President and Chief Executive Officer said, "We are disappointed in our third quarter performance as sales of instruments to our largest pharmaceutical customers were weak due to delays and reductions in their capital spending plans. Unfortunately, revenue growth associated with our new product initiatives was insufficient to offset this market weakness."

As communicated in a prior press release, Waters Corporation will webcast its third quarter 2005 financial results conference call this morning, October 25, 2005 at 8:30 a.m. eastern time. To listen to the call, connect to www.waters.info , choose Investor Relations and click on the Live Webcast. A replay of the call will be available through November 1, 2005, similarly by webcast and also by phone at 203-369-3997.

Waters Corporation holds worldwide leading positions in three complementary analytical technologies - liquid chromatography, mass spectrometry and thermal analysis. These markets account for $4.5 - $5.0 billion of the overall $20 + billion analytical instrument market.

CAUTIONARY STATEMENT

This release contains "forward-looking" statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand that involve a number of risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words, "believes", "anticipates", "plans", "expects", "intends", "appears", "estimates", "projects", and similar expressions are intended to identify forward-looking statements. The Company's actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, fluctuations in capital expenditures by our customers, in particular large pharmaceutical companies, regulatory and/or administrative obstacles to the timely completion of purchase order documentation, introduction of competing products, such as improved research-grade mass spectrometers, higher speed and/or more sensitive liquid chromatographs, by other companies, pressures on prices from competitors and/or customers, regulatory obstacles to new product introductions, lack of acceptance of new products, other changes in the demands of the Company's healthcare and pharmaceutical company customers, changes in distribution of the Company's products, changes in the healthcare market and the pharmaceutical industry, loss of market share through competition, potential product liability or other claims against the Company as a result of the use of its products, risks associated with lawsuits and other legal actions particularly involving claims for infringement of patents and other intellectual property rights, and foreign exchange rate fluctuations potentially adversely affecting translation of the Company's future non-U.S. operating results. Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's annual report on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission (the "SEC"), which "Risk Factors" discussion is incorporated by reference in this release. The forward-looking statements included in this release represent the Company's estimates or views as of the date of this release report and should not be relied upon as representing the Company's estimates or views as of any date subsequent to the date of this release. The Company specifically disclaims any obligation to update these forward-looking statements in the future.


                  Waters Corporation and Subsidiaries
                 Consolidated Statements of Operations
                 (In thousands, except per share data)
                              (Unaudited)


                               (Unaudited)            (Unaudited)
                            Three Months Ended     Nine Months Ended
                          October 1,  October 2, October 1, October 2,
                             2005       2004       2005       2004

Net sales                    273,031    264,808    825,966    780,382
Cost of sales                115,508    111,009    344,375    324,663

  Gross profit               157,523    153,799    481,591    455,719

Selling and administrative
 expenses                     76,645     71,967    240,101    219,234
Research and development
 expenses                     16,982     17,001     50,214     48,766
Purchased intangibles
 amortization                  1,241      1,228      3,789      3,578
Litigation settlement and
 provisions (A)                    -          -          -     (9,277)
Restructuring and other
 unusual charges, net              -       (158)         -        (54)

  Operating income            62,655     63,761    187,487    193,472

Interest (expense) income,
 net                          (1,969)       445     (2,068)     1,671
  Income from operations
   before income taxes        60,686     64,206    185,419    195,143

Provision for income taxes
 (B)                          34,969     12,266     59,042     42,607

  Net income                  25,717     51,940    126,377    152,536


Net income per basic
 common share                  $0.23      $0.43      $1.09      $1.28

Weighted average number of
 basic common shares         112,981    119,519    115,923    119,452


Net income per diluted
 common share                  $0.22      $0.42      $1.07      $1.24

Weighted average number of
 diluted common shares and
 equivalents                 114,942    122,597    117,943    123,168


(A) The results for the nine months ended October 2, 2004 include
    provisions of $7.8 million for ongoing patent litigation with
    Hewlett-Packard Company and settlement income of $17.1 million
    related to patent litigation with Perkin-Elmer Corporation.

(B) The results for the three months and nine months ended October 1,
    2005 include a tax provision of approximately $24.0 million
    related to a qualified dividends distribution under the American
    Jobs Creation Act of 2004.





                  Waters Corporation and Subsidiaries
                 Consolidated Statements of Operations
                 (In thousands, except per share data)


                               (Unaudited)            (Unaudited)
                            Three Months Ended     Nine Months Ended
                          October 1,  October 2, October 1, October 2,
                             2005       2004       2005       2004

Reconciliation of income
 per diluted share, in
 accordance with generally
 accepted accounting
 principles, with adjusted
 results:

Income per diluted share       $0.22      $0.42      $1.07      $1.24
                          ----------- ---------- ---------- ----------

Adjustment for litigation
 settlement and
 provisions, net of tax            -          -          -     (5,688)
Income per diluted share
 effect                            -          -          -      (0.05)
                          ----------- ---------- ---------- ----------

Adjustment for
 restructuring and other
 unusual charges, net of
 tax                               -       (125)         -        (57)
Income per diluted share
 effect                            -      (0.00)         -      (0.00)
                          ----------- ---------- ---------- ----------

Adjustment for tax
 provision for qualified
 dividends distribution       24,000          -     24,000          -
Income per diluted share
 effect                         0.21          -       0.20          -
                          ----------- ---------- ---------- ----------

Adjusted income per
 diluted share:                $0.43      $0.42      $1.27      $1.19
                          =========== ========== ========== ==========


The adjusted income per diluted share presented above is used by
the management of the Company to measure operating performance with
prior periods and is not in accordance with generally accepted
accounting principles (GAAP). The above reconciliation identifies
items management has excluded as non-operational transactions.
Management feels these transactions are not indicative of
understanding the ongoing operations of the business or its future
outlook.

                  Waters Corporation and Subsidiaries
                 Condensed Consolidated Balance Sheets
                     (In thousands and unaudited)

                                            October 1,    December 31,
                                                2005          2004


Cash and cash equivalents                      488,903        539,077
Accounts receivable                            221,857        271,731
Inventories                                    140,965        139,900
Other current assets                            18,548         23,176
   Total current assets                        870,273        973,884

Property, plant and equipment, net             139,943        135,908
Other assets                                   344,547        350,634
   Total assets                              1,354,763      1,460,426


Notes payable and debt                         403,791        206,663
Accounts payable and accrued expenses          305,939        286,327
   Total current liabilities                   709,730        492,990

Long-term debt                                 250,000        250,000
Other long-term liabilities                     40,400         38,750
   Total liabilities                         1,000,130        781,740

Total equity                                   354,633        678,686
   Total liabilities and equity              1,354,763      1,460,426

CONTACT: Waters Corporation
Gene Cassis, 508-482-2349
Vice President of Investor Relations

SOURCE: Waters Corporation